Business Environment Chapter 4 2w365j

Unit 4 SOCIO-CULTURAL ENVIRONMENT Concept and Nature: Socio-cultural environment refers to implication of sociocultural factors on business. Socio-cultural factors relate to the prevailing social and cultural conditions in society. Social factors or condition may include social organizations and institutions like marriage, family, society, ownership etc. cultural factors include customs, traditions, values, belief, language, religion etc. Components of socio-cultural environment: The main components of socio-cultural environment are as follows: 1.

2. 3.

4.

5.

6.

7.

Knowledge and beliefs: The knowledge and beliefs refer to a people‟s prevailing notions of reality. They include myths and metaphysical beliefs and scientific realities. Ideals: Ideals refer to the social norms which define what is expected, what is customary, what is right or what is proper in a given situation. Preferences: Preferences refer to the society‟s definitions of those things in life which are attractive or unattractive as objects of desire of want. Preferences may differ between cultures. Education: Through education, people became more and more civilized and aware of their rights and privileges and higher education expanded according to the democratic ideals of equal opportunity and increasing industrialization. Family: Every human society is based on the family. The family is the smallest and probably the most fundamental social institution in the human community. It concerns itself with love, sexual relationship, marriage, reproduction, socialization of the child and the various levels of status and roles involved in kinship organization. Authority: Authority is the power or the right to act, to command, or to exact action from others. The concept of authority refers to the formal right or power to call for compliance in behavior or action. Ethics: The term „ethics‟ may be defined as the discipline which deals with what is good and what is bad and which deals with moral duty and obligation. It is thus related to morals and philosophy and is not confined to legal status.

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8.

Marriage: Marriage is considered to be the only means of raising a family. It is considered to be an important implication for the family. It is usually heterosexual and entails exclusive rights and duties of sexual performance. 9. Religion: Religion refers to a specific and institutionalized set of beliefs and practices generally agreed by people or sects. Important religions are Hindus, Christianity, Islam and Buddhism. 10. Ambition or complacent: An individual, who is ambitious in his life, is highly motivated, is wealth-acquisitive, and has a strong will to excel. On the other hand, if an individual is complacent, he becomes fully satisfied even with small achievement. Impact of socio-cultural environment of business: The impact of socio-cultural factors is as follows: 1.

2.

3.

People’s attitude: Attitude of people towards business is determined to a large extent by their culture. Business methods are a product of habits, preferences, beliefs, customs, and traditions of the society in which they exist. Beliefs and value systems regarding what is right and what is wrong are basic to all business activities and they justify for doing of not doing certain things in a particular value system by which activities of business people and other groups are judged. Types of goods and services: Culture determines the types of goods and service to be produced by business firms. What types of food people eat, what kinds of clothes they wear, what beverages they drink, what kinds of vehicles they use for their movement, what instruments they use for their entertainment and what kinds of materials they use for constructing their residential and commercial buildings – all these vary from culture to culture and from time to time within the same culture. Workers’ attitude to work: Attitude of workers to work depends upon their culture. Motivation, morale, liking, desire, expectation about future prospects and other related aspects of human resource management are based on the workers‟ attitude to their work. Attitudes to work and attitudes to leisure vary from workers to workers and from country to country. Therefore, different types of appeal, reward and penalty are effective in different cultures. Commitment to work and not detachment from work is required for business prosperity.

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4.

Education: Today‟s industrial societies are knowledge-based and educated. Education has been accorded priority among the development activities. Education has thus become beneficial to business and business, in its turn, has responded equally and started ing education. This to education by the business and industry is manifest in starting and maintaining educational institutions, sponsoring of employees to continue their education etc. 5. Family: In modern days, the families that are most common are nuclear families. A nuclear family consists of husband and wife and their children. As the big families are broken up, family businesses are slowly turning into limited companies, family companies such as Ambanis, Tatas etc. 6. Marriage: Educated families and educated grooms choose educated girls in marriage so that after marriage the wife can help her husband in his business, exchange ideas and prefer to have a limited family to enjoy a higher standard of living. The wife can also become an active partner in the business of her husband. 7. Religion: Religion has great influence on business. Religious beliefs govern such related issues as work culture of employees, employer-employee relationship, boss-subordinate relation, people‟s attitude towards business etc. 8. Ethics: Application of ethics to the business practices is business ethics. Business is part of society, so it has to follow the ethical practices prescribed by the society. Peter Drucker has said that business need not have separate set of ethical values, whatever good principles are applicable to society, and the same are applicable business to. The conduct of business should be to ensure welfare of society. 9. Authority: In business, authority can be thought of as the power to exact others to take action considered appropriate for achieving a predetermined objective. Human organizations have been formed to create formal superiorsubordinate authority relationships for performing and coordinating group activities to achieve certain goals of the group. 10. Ambition or complacent: An individual, who is ambitious in his life, is highly motivated, is wealth-acquisitive, and has a strong will to excel. On the other hand, if an individual is complacent, he becomes fully satisfied even with small achievement. AFTAB G M, ANJUMAN DEGREE COLLEGE, BHATKAL

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Culture and Globalization: Culture of each country and region differs. Each region and society has a different culture. These cultural differences relate to the behavior of workers and management, workers attitude towards management and job, nature of product people like. Language people speak and understand, role of tradition, customs in society. Cultural conformity and culture adaptation are essential for survival. Cultural conformity means framing the business policies to suit to the prevailing culture. Cultural environment of each country is different. Religion, religious practices, language, food habits, customs and traditions, beliefs, tastes and preferences, life style differ. Business firms, particularly MNCs have to understand the life styles and cultural differences of the region were they are operating; otherwise they will receive culture shock. Cultural shock means, confusion, in security and anxiety i.e. caused due to the alien or new environment. Ethics in business: Wayno Mandy has defined ethics as “The discipline dealing with what is good and bad, or right and wrong, or with moral duty and obligation.” The deeds and behavior of people can be classified as good or bad. Those behaviors, which do well to others, are good deeds or ethical behavior and those that result in harm to others, are bad deed or unethical behavior. Ethics refers to code of good conduct that is accepted by the society. They refer to rules, values, principles etc., which are appreciated by the society. E.g. truth, honesty, loyalty, sincerity etc. It is expected that every individual or organization will be ethical in his behavior and relationship with others. Application of ethics to the business practices is business ethics. Business is part of society, so it has to follow the ethical practices prescribed by the society. Peter Drucker has said that business need not have separate set of ethical values, whatever good principles are applicable to society, and the same are applicable business to. The conduct of business should be to ensure welfare of society. Social responsibility of business: AFTAB G M, ANJUMAN DEGREE COLLEGE, BHATKAL

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Business may belong to the owners, but its existence and growth is due to it receives from various segments like customers, employees, suppliers, nature, Government etc. Business has to fulfill its responsibility by repaying to these people for the benefit it has received from these people. This is social responsibility. Definition: According to Browser, social responsibilities are those acts, which are needed and desired by the society. By performing such deeds business can fulfill its social objectives. Arguments for Social Responsibility: Gandhiji has advocated trusteeship principle to business, i.e. business should be regarded as a trust. The wealth and resources of business should be utilized for the welfare of community at large. Therefore, the arguments for social responsibility are as follows: (1) Public image: Business can build better image in the society and earn goodwill by participating in social activities and contributing towards welfare measures. (2) Corporate citizenship: Business being a corporate citizen it has duties and obligation towards society. Business has to prove its social existence and corporate citizenship by actively participating in social activities. (3) Creation of society: Business is a creation of society; it draws heavily from the society in the form of resources and facilities. Business has the responsibility to pay back to the society by fulfilling the social obligation towards society. (4) Prevention is better than cure: Problems and difficulties faced by society, like unemployment, environment degradation, slum problems etc will affects the living of the people. Business must actively participate in preventing these problems. (5) To get incentives: Tax incentives are given, land and other infrastructure are assets. Business in order to get such incentives should participate in social activity. (6) Long range planning: Firms which want to be successful in the long run must have continuous association with the society. These king of firms do not aim at profit maximization rather they appropriate their profits towards welfare of workers, community etc. AFTAB G M, ANJUMAN DEGREE COLLEGE, BHATKAL

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(7) Globalization: MNCs to be acceptable to local community must interact and mix with them. It must undertake social and welfare measures to get their appreciation. Arguments against Social Responsibility: Late Ambani says, Business of business is to do the business. Social activities are the domain and responsibility of politicians and philanthropists. Arguments against social responsibilities are as follows: (1) Profit maximization: Efficiency of business is measured in of profits it has made. If the business diverts to social responsibilities, it has to sacrifice profit and main objective of business is not achieved. (2) Government and Society responsibility: Every person has specific role to play. The role business is to make economical use of resources, produce at lower cost and sell at reasonable price; this itself is a great social service to the society. (3) Lack of ability: Manager of the business who is appointed by the owners (equity holders) cannot be made able to social responsibility. He is appointed to manage successfully and make adequate profits, for which he can be made able. (4) Lack of social skills: Business does not have expertise to manage social issues, as it is concerned with buying, producing and selling activities. Business may not be in a position to address social problems effectively. (5) Concentration of power: Business has economic power and clout. If it enters social arena it will also accumulate social power. This result in concentration power may be dangerous to interests of society and economy. (6) Lack of controls: If business enters the society to address social issues, there will be divergence in its functioning. Business may have to care of both economic and social issues. This may create confusion in the organization regarding objectives and functions of business. (7) Increase in cost or wastage of resources: Business has to spend its resources for the purpose of welfare activities. This results in wastage of economic resources for non-economic purpose. Social Audit:

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Social audit is checking or ing the performance of social responsibility function of a business. Social audit evaluates to what extent social objectives of a firm are achieved. Definitions: Keith Davis & Blomstorm: “Social audit is a systematic study and the evaluation of an organizations social performance as distinguished from its economic performance. It is concerned with possible influence on the social quality of life instead of economic quality of life.” Features of Social Audit: (1) Social Audit evaluates impact or influence these activities have made on the quality of life in the society. (2) Social audit is performance oriented not result oriented. It verifies to what extent the firm has fulfilled the social obligations. Performance may not be measured to specific targets or goals. (3) Conducting social audit is a difficult exercise as there are no established norms to conduct it. The information and data relating to the audit are to be collected from public, which is a difficult exercise. (4) Social audit includes data and information, which is quantitative and qualitative. The quantity data is supplemented with quality data in of statement, explanation of social tasks undertaken by firm and its impact on quality of life. (5) Social audit can be conducted either by internal or external auditors. These auditors should be trained to conduct social audit and evaluate social activities of organization. Benefits of Social Audit: Business has following benefits of conducting social audit. 1)

2)

3)

Evaluation of objectives: Conduct of social audit helps a firm to know achievements in the area social activities and social responsibilities fulfilled by the firms. Creates awareness and responsibility: It makes the entire organization and staff responsible towards the understanding importance of social goals, role and contribution each employee has to make to achieve these goals. Evaluation of programs: Social audit evaluates programs undertaken for social responsibilities. Each area of social activity is evaluated, its

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4)

5)

6)

contribution to society in measured, this helps in future to prepare better programs. Preparation of budget: It helps to make estimation of amount required to conduct various social objectives. It also evaluates benefits expected out of such expenditure. Based on this firm can make provision in the budget. SWOT analysis: Social audit helps to make SWOT analysis or performance of social responsibilities of business. Based on such analysis, firms can prepare effective social programs. Publicity: Society will come to know about the contribution made by business in social areas and this will increase the reputation and goodwill of business.

Business participation in cultural affairs: Business does two things, specially, in respect of culture: a.

b.

ing cultural activities: These activities are such as employment of artists and musicians, organization of exhibitions of contemporary paintings, sponsoring of cultural programs through television or radio programs, giving prizes and awards for excellent performance in acting, singing, dancing and such other extracurricular activities, conducting variety entertainments, sponsoring sangeet sammelanas, maintaining sangeet research academy and providing financial assistance for construction of salyana bhavans, drama theartres etc. Beautifying building designs: In modern days, the business people are giving more importance to the aesthetic values and greater attention for beautifying the factory buildings as well as business buildings and offices. Factory buildings have now become industrial parks, which appear more beautiful than the surrounding residential houses.

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